Graphic: renjith krishnan

The rand remained firmer against the dollar in late afternoon trade on Friday as it tracked a euro that had earlier hit multi-month highs against the greenback and other major currencies.

“Risk is on ahead of the European Central Bank's refinancing operation next week,” a local rand trader said.

At 15:49 local time, the rand was bid at R7.5985 to the dollar from its previous close of R7.6552. It was bid at R10.1920 to the euro from R10.2295 before, and at R12.0140 against sterling from R12.0390 previously.

The euro was bid at US$1.3415 from its previous close of US$1.3372.

Meanwhile Dow Jones Newswires reported that currency traders looked ahead positively to next week's promise of more liquidity from the European Central Bank, encouraged by the progress made in Greece and by tentative signs of global economic improvement.

The euro rose to its highest level against the dollar since December 9, pushing above $1.34.

In keeping with the more constructive tone, calmer markets were now being anticipated by derivative markets for the foreseeable future. The extent to which the euro was expected to move against the dollar in the next year has now fallen to levels not seen since April 2010, according to options pricing.

But some analysts warned against complacency, arguing that the Greek crisis would linger on, even as the country launched its bond-swap offer to private creditors as part of a broader debt restructuring and bailout. Some also highlighted the potential for an oil-shock as tensions with Iran built.

“The last thing the global economy needs right now is a supply shock that drives crude sharply higher,” Chris Turner, a currency strategist at ING Bank NV, said in a note to clients. But he added that abundant liquidity and improving global growth prospects were supporting investor confidence for now.

The ECB was expected to hold a second round of long-term refinancing operations on Wednesday and that was making investors more willing to put more capital to work by snapping up equities and betting on relatively riskier currencies like the euro and Australian dollar, analysts said.

“The world is a dangerous place, but central bank largesse and the absence of recession are good for high-yielding currencies, equities and commodities,” analysts at Societe Generale said in a research note.

Speculative market players were also still heavily positioned for a leg lower in the euro, so the generally better tone in markets was forcing them to unwind off some of these plays and in turn helping to extend the single currency's gains. - I-Net Bridge